Correct, it is not a meaningful reduction of security. In terms of information theory, the search-space reduction will not take make a strong password tractable. And that's leaving aside that you could already get that information via sound, or visually by looking at the keyboard. And GUIs already gave the length of the password, it was only some text-based applications that gave zero password feedback.

Conversely, making people more comfortable with security measures may well improve security; for instance, some people will have an easier time typing in longer and more complex passwords thanks to password feedback.

Usability is often a security feature.